Liberals postpone policy update that could help SNC-Lavalin avoid ban from federal business

OTTAWA — The federal government has postponed a long-awaited update to Canada’s corporate-misconduct provisions, including changes that could help SNC-Lavalin avoid being barred from lucrative federal contracts.

The government wants more time to study how it will modernize its so-called “integrity regime” following intense public debate about corporate wrongdoing that was ignited by a political controversy related to SNC-Lavalin, according to a federal spokesman. He did not say how long the delay will last.

The government revealed the postponement following questions from The Canadian Press, which obtained an internal federal document that showed the Liberals were planning to announce a revision in early February.

“The integrity regime’s updated ineligibility and suspension policy will be published in early February 2019, and will come into effect at the end of February 2019,” said information contained in a Feb. 4 email to an associate deputy minister. The email was released under access-to-information law.

Three months later, the government has yet to publish the integrity-regime update.

A few months ago, a change to the scheme would have attracted very little public attention. Today, it’s a delicate political issue for the Liberals.

The integrity regime has been under scrutiny ever since SNC-Lavalin, the huge Montreal-based engineering and construction firm facing Canadian criminal charges over dealings in Libya, found itself at the centre of a political storm in Ottawa.

On Feb. 7, three days after the email, the Globe and Mail newspaper reported that Prime Minister Justin Trudeau’s aides pressed former attorney general Jody Wilson-Raybould to intervene in the SNC-Lavalin case and help it avoid prosecution through a plea-bargain-type deal. Trudeau has denied his officials acted inappropriately.

In recent days, a Quebec judge ruled that there’s enough evidence against SNC-Lavalin to send the case to trial.

A conviction could result in a severe punishment for the company: a disqualification from federal business for 10 years. Since much of SNC-Lavalin’s work is in civil construction projects, that could be deeply damaging to its Canadian business.

However, SNC-Lavalin could still see a shorter suspension from federal contracts — or perhaps none at all — if the proposed update to the integrity regime comes into force.

SNC-Lavalin urged the Liberal government in 2017 to weaken federal penalties for corporate misconduct to the point a guilty company could completely avoid a ban on receiving public contracts.

A draft of the Liberal government’s new scheme released last fall shows the revised provisions will carry no minimum ineligibility period. Public Services Minister Carla Qualtrough, who is in charge of federal procurement, has said such a change would address concerns raised by companies about the “lack of flexibility” in the 10-year suspension terms.

Any adjustments to the regime that help SNC-Lavalin dodge a ban could be politically sensitive for the Liberals.

On Feb. 28, under questioning by a House of Commons committee, Qualtrough said the updated integrity regime would be finalized by late March or early April.

The integrity regime was designed to ensure the government only does business with ethical companies in Canada and abroad.

Federal officials held a public consultation on the integrity regime in 2017. A summary of the process, which included input from SNC-Lavalin, said most participants felt a disqualification period of a decade, or even five years, was too long.

Last fall, the proposal went through another round of public consultations with the aim of making additional tweaks before coming into force.

“Subsequent to this consultation, there has been considerable public discussion around corporate wrongdoing, as well as governments’ responses to such misconduct,” Jean-Francois Letourneau, a spokesman for Qualtrough’s department wrote in an email Saturday.

“As a result, the government of Canada is taking additional time to assess possible next steps regarding the Integrity Regime.

“In the meantime, the current Ineligibility and Suspension Policy remains in effect.”

Another tool designed to deal with corporate wrongdoing has been under a microscope since the political affair involving SNC-Lavalin first made headlines.

The company has made unsuccessful attempts to preserve its ability to bid on federal contracts under that separate, plea bargain-type approach that would head off a criminal case.

But the federal director of public prosecutions ruled late in 2018 that its case was ill-suited for such a deal, which is known as a remediation agreement or a deferred-prosecution agreement.

It’s the legal avenue at the heart of the political controversy that surrounded the Liberals earlier this year.

The federal attorney general has the power to overrule the director’s rejection of a deferred-prosecution agreement and take on the case themselves. Wilson-Raybould declined to do so.

David Lametti, who replaced Wilson-Raybould as justice minister and attorney general, acknowledged Wednesday in response to reporters’ questions that a deferred-prosecution agreement with SNC-Lavalin remains a possibility. He declined to comment further, saying the case was before the courts.

Trudeau has argued a criminal trial could lead to the company’s moving to the United States and the loss of thousands of jobs, a sentiment supported by an internal SNC-Lavalin document obtained by The Canadian Press.

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